Bearish View
Sell the EUR/USD and set a take-profit at 1.1450.
Add a stop-loss at 1.1625.
Timeline: 1-2 days.
Bullish View
Set a buy-stop at 1.1600 and a take-profit at 1.1700.
Add a stop-loss at 1.1500.
The EUR/USD pair is struggling as the market reflected on the relatively strong American inflation data published on Friday. The pair is trading at 1.1560, which is substantially lower than last Friday’s high of 1.1692.
US Inflation Rising
The EUR/USD declined sharply on Friday after the latest US Personal Consumer Expenditure (PCE) Index. The data, which are the Fed’s most preferred inflation gauge, increased by 4.4% in the year through September. This was the fastest pace of growth in more than 30 years. The data led to a sharp increase of bond yields as investors started to price in a hawkish Federal Reserve decision.
The pair decline was a reversal of what happened on Thursday when the European Central Bank (ECB) delivered its interest rate decision. The bank decided to leave interest rates unchanged. But it also tweaked its bond-buying purchase program.
Looking ahead, the next key mover for the EUR/USD pair will be the latest manufacturing data from the US and the Eurozone. Based on the flash PMI data published a few days ago, analysts expect that the Eurozone and US manufacturing sectors did well in October. However, the key challenges for the two sides were the rising prices of financial assets and the supply challenges.
The next key top events will be the Federal Reserve decision that will come out on Wednesday. Analysts expect that the central bank will leave interest rates unchanged.
But, with inflation rising and the unemployment rate falling, analysts expect that the Fed will turn a bit hawkish in this meeting. It could do this by lowering the size of the asset purchases program. Also, the bank could turn hawkish by signalling that interest rates will rise sooner than expected. The EUR/USD will also react to the latest non-farm payrolls data scheduled for Friday.
EUR/USD Forecast
The four-hour chart shows that the EUR/USD pair declined sharply on Friday after the US inflation data. The decline continued on Monday morning. The pair is slightly below the key support level at 1.1582, which was the lowest level on October 27th. It has also moved below the 25-day and 50-day moving averages.
Notably, it is also slightly above the key support level at 1.1523, which was the lowest level in October. Therefore, the pair will likely keep falling as bears attempt to move below the key support at 1.1500.
